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Business/Finance See other Business/Finance Articles Title: Sun sets on another solar energy company I was all ready to get in a few good-humored jabs at Dr. Kent Moors, because the stock he pitched so aggressively starting in mid-November as the “greatest leap of mankind” stock for “free energy” has been immolated… and I kept seeing the same ads for his Energy Advantage, continuing to tease the stock, all the way down. Even this morning, the day after fresh fears of bankruptcy erupted for that stock, the ad ran again. But then I took a closer look, which I hadn’t done for a while — and the ad that ran this morning is slightly different than the ad he started running on November 17 (I don’t know on what date the ad changed, but the new ad is dated “February 2016" — both the new and old ads are still online in various places). That previous ad, which many of you no doubt remember for the pictures of sand and the implication that his favorite stock had found a new way to generate electricity from sand, was focused primarily on SunEdison (SUNE), which has been one of the worst blow-ups in the market over the past year as they used hedge fund-suggested financial engineering and heavy debt to grow rapidly and finance new solar installations and expansions… then fell on their face when the “cheap financing” provided by that financial engineering proved to be unsustainable. The new ad still has those zoomed in photos of sand, the talk about how big corporations like Google and Facebook and Costco are depending on this “new fuel”, and the general pitch for solar power. That’s essentially the same, with minor updates, as the ad that touted SunEdison. But when I look closer, I see that a few specific hints have changed… which makes me suspect that perhaps Moors has finally given up on SUNE as his standard-bearer in solar power (understandable, since it has fallen from $31 to $0.57 in a year and gives every impression of a company teetering on the edge). I don’t actually know what Dr. Moors has suggested to his subscribers as SUNE has fallen, or when — maybe he had them out of it at $3 or $2 or something along the way and shifted course, or maybe he remains convinced that their technology and their market presence will give them the chance to dig their way out and he’s still buying today. If he’s still actively recommending it, I suspect he’s at least worried now that the SEC is investigating them for possibly misreporting their cash position (if they don’t have as much cash as investors expected, bankruptcy fears could be more acute — the debt position is truly massive). But contrary to what I thought when i opened up my email this morning, it does at least look like his big, aggressive push for solar power has changed targets — he’s no longer teasing SunEdison, he’s now teasing someone else. So who is it? Let’s check the clues. This is from the newest version of the ad that I got today: “And while there will be numerous plays coming down the pike, you will NEVER have another opportunity like you have today – right now! Irregulars Quick Take Paid members get a quick summary of the stocks teased and our thoughts here. Join as a Stock Gumshoe Irregular today (already a member? log in at top right) “You see, at the center of this energy revolution sits one tiny company that’s about to go from virtual obscurity to household name. “Their revolutionary technology has completely transformed the way this fuel is harvested. “At the same time, they have over 130 patents protecting their market share. “To say this company is in the driver’s seat would be an understatement of epic proportions. “At this moment, every major energy player on the planet is banging on their door looking for cheap energy. “Their client roster is a ‘who’s who’ of global energy players, and they are poised for a global rollout of unprecedented proportions “In short, the upside is staggering… “Remember, Google, Walmart, Facebook, Apple, and the U.S. Department of Defense are making massive investments into solar. And with 130 patents, this company is in the driver’s seat.” That might sound really, really familiar — and it is almost identical to the ad that was sent around last time. Here’s the version that was teasing SunEdison back in November: “You see, at the center of this energy revolution sits one tiny company that’s about to go from virtual obscurity to household name. “Their revolutionary technology has completely transformed the way this fuel is harvested. “At the same time, they have over 750 patents protecting their market share. “To say this company is in the driver’s seat would be an understatement of epic proportions. “At this moment, every major energy player on the planet is banging on their door looking for cheap energy. “In fact, their client roster is a ‘who’s who’ of global energy players. “They’ve already locked in enormous long-term deals with the likes of Walmart, Google, the U.S. Department of Defense, and New York City.” See those little changes to the specifics? No longer are we dealign with a company that has 750 patents and long-term deals with Walmart, Google, etc… now we’re dealing with a company that has 130 patents, and is in the driver’s seat for solar energy, which is also an area were Google, Walmart, etc. are making big investments, but isn’t necessarily specifically working with those mega companies. The marketing spiel ends up giving the same impression, but the specifics are different. And, one assumes, the company being hinted at is now different — apparently Dr. Moors believes that SunEdison has fallen out of “the driver’s seat” and been replaced by a substitute driver at some point in the last few months. So who might it be? This is what we get by way of clues: “I’d like to introduce you to an extraordinary company. “It is, quite literally, the SPARK that put solar on the fast-track to total domination of the global energy markets. “If you could only own one solar company for the next 10 years, this would be the one. “There’s no doubt in my mind… “Remember, the energy sector is responsible for rare and exceptional trades big enough to turn $1,000 into $1 million in a single transaction. “And while there are no guarantees, this ‘premier’ solar company could be the biggest win we’ve ever seen. “Not just in the energy sector, but in financial history. “Let me give you the facts… “Own the Next Super-Major Energy Titan for Pennies on the Dollar!” Huh. No actual clues in there, eh? That is, in fact, word for word, exactly the same thing he said about SunEdison back in the prior version of the ad. Just a reminder to keep ahold of a healthy handful of skepticism whenever a pundit says “there’s no doubt in my mind” or “if you could only own one [company] for the next 10 years, this is it.” So do we get anything else that might be a bit more specific about the substitute for SUNE in Moors’ affections? Here are the hints from the old SUNE pitch: “It’s a complicated process, and this company has taken it to a whole new level. “You see, in its raw form, Si is full of impurities… “These impurities inhibit the conversion process, making for expensive energy, once as high as $76 per KWH. “That’s what makes this company’s patented technology such a remarkable breakthrough. “During the process, very small particles of Si called ‘seeds’ are suspended in a cloud of gas. “Si in the gas attaches to other Si particles, forming larger and larger beads. “These beads eventually drop out of the gas like rain… “The beads are then melted and formed into wafer-thin slices of 99.99% pure Si… “The technology is 1,000% more efficient than the industry standard. “And the big thing: The cost… “Again, traditional solar cells delivered energy at a cost of $76 per KWH. “This company’s technology is so efficient, and creates such pure Si, they are supplying a utility company with solar at 5 cents per KWH. “That’s right. This company’s technology is so significant that utility companies are throwing in the towel and buying solar power!” And now, from the updated pitch for the new mysterious solar company: “It’s a complicated process, and this company has taken it to a whole new level. “You see, in its raw form, Si is full of impurities… “These impurities inhibit the conversion process, making for expensive energy, once as high as $76 per KWH. “That’s what makes this company’s patented technology such a remarkable breakthrough. “First, raw Si is melted in a mono-crystalline electric furnace. “During the melting process, a stream of Argon is pumped into the furnace to remove impurities and inhibit oxidation. “The molten Si is then cast into square blocks and cooled. “The blocks are then sliced into wafer-thin slices of pure Si… “The technology is scientific genius and creates highly purified Si, ready to convert sunlight into ready-to-use power. “In fact, this tiny company’s patented solar cells set a NEW WORLD RECORD for power output. “Incredible… and the big thing: the cost… “Again, traditional solar cells delivered energy at a cost of $76 per KWH. “This company’s technology is so efficient, and creates such pure Si, they are supplying a utility company with solar at 5 cents per KWH.” Seriously? Those, again, are almost identical. Are there really two “remarkable breakthroughs” from different companies? Or did the copywriter just tinker slightly with the ad so it could apply to someone aside from SUNE? Well several solar cell manufacturers over the years have set “world records” of various types — including efficiency, cost, output, etc. But if you’re talking about this particular silicon manufacturing process, and a world record for power output, and 130 patents, then what Dr. Moors is teasing this time around is JinkoSolar (JKS). About which I know almost nothing — but it has not, at least, fallen apart like SunEdison. They are, like SunEdison, vertically integrated — they process their own silicon, including recycling, and create their own wafers and build their panels, but they also do develop solar power projects. Here’s how they describe themselves: “JinkoSolar (NYSE: JKS) is a global leader in the solar industry. JinkoSolar distributes its solar products and sells its solutions and services to a diversified international utility, commercial and residential customer base in China, the United States, Japan, Germany, the United Kingdom, Chile, South Africa, India, Mexico, Brazil, the United Arab Emirates, Italy, Spain, France, Belgium, and other countries and regions. JinkoSolar has built a vertically integrated solar product value chain, with an integrated annual capacity of 3 GW for silicon ingots and wafers, 2.5 GW for solar cells, and 4.3 GW for solar modules, as of December 31, 2015. JinkoSolar also sells electricity in China, and had connected approximately 1,006.6 MW of solar power projects to the grid, as of December 31, 2015.” They are not nearly as levered as SunEdison, which isn’t saying much — they have boosted their borrowing over the past couple years, so they have about $2 billion in debt matched by about $800 million in cash at the end of 2015, though they also have a much larger “accounts payable” line than they do “accounts receivable” — so it’s a larger operation than is indicated by the market cap of only $600 million. Their revenue has doubled over the past couple of years, and they have been profitable for a couple years, so presumably they can handle that leverage. On an Enterprise Value/EBITDA basis they’re in a fairly similar valuation neighborhood to both industry giant First Solar (FSLR) and the similarly sized Chinese solar company Canadian Solar (CSIQ) — JKS is at EV/EBITDA of 8.5, FSLR and CSIQ are both around 7. When it comes to earnings, analysts expect that JKS will earn $5 a share this year and boost that by about 15% to $5.78 in 2017… which means there’s obviously some risk or fear in there that I don’t know about, because that means JKS is trading at only 4X expected earnings for the current year. That doesn’t generally happen unless a lot of investors smell a rat or are panicked about a sector. It could just be that analysts have no idea how to guess at earnings — JKS reported earnings that were dramatically worse than expectations for the first three quarters of last year (as in, 50% lower than expected), but then also reported earnings for that final quarter that were more than 30% higher than expected. So I’d use those analyst forecasts sparingly, don’t count on them too much. For actual trailing earnings, JKS earned about $3.30 a share in 2015 — so even on that metric it’s not terribly expensive at about 7X trailing earnings. So… why is it so cheap in a sector that is generally seeing top line growth? Is it just that their earnings have fallen by about 25% a year over the last several years? Is it fear of the sector because of price competition? Are people still just afraid of all Chinese solar stocks because of the horror stories of fraud and the worry about being unable to trust numbers from some Chinese companies? I have no idea, I’m afraid… but I am pretty sure that the Thinkolator is accurate in telling us that Dr. Moors has dropped SunEdison as his standard bearer in solar and decided to throw his weight behind JinkoSolar instead. Think it will work out? Have other favorites in the space? Let us know with a comment below. P.S. If you’re wondering about the other two companies Moors is pitching in this ad, those appear to be unchanged — still Solar Window (WNDW) for their experimental “solar panel” windows for skyscrapers, and Tesla (TSLA) for their Powerwall that can provide “nighttime solar.” We covered those two in the follow-up article here, my opinion on them hasn’t changed. Poster Comment: robert easton says: March 30, travis, thank you for your excellent sleuthing. dr more recommended to bail out of SUNE yesterday. here is a copy of his release: Action to Take: Sell SunEdison Inc. (SUNE) at market. Urgent Update Re: SunEdison By Dr. Kent Moors Dear Robert Easton, This morning, I woke to the disturbing news that SunEdison Inc. (SUNE) is under SEC investigation for having mislead investors about how much cash it had on hand. I’m furious, as I’m sure many of you are. I first added this company to the Energy Advantage Portfolio on the basis of its phenomenal potential, and I recommended that you stay in through all its temporary volatility because the company – according to its filings – appeared to have enough liquidity to weather this crisis. But now it seems that SunEdison’s management may have in fact been misleading investors about its liquidity. The Wall Street Journal reports that the SEC is investigating whether SUNE’s reported $1.4 billion in cash was actually much smaller than that, potentially as small as $56 million. This, if true, is dangerously misleading, if not outright criminal. But even more than anger, I feel disappointment. SunEdison assembled some of the best solar power assets in the world, becoming the world’s largest solar power developer. The company was perfectly positioned to profit off the explosive growth of solar power – estimated to reach 80% in the U.S. in 2016 alone. If the SEC is correct, and SUNE executives did indeed mislead investors (including us), then they managed to waste all of this wonderful potential, and – worse – shareholders’ money. And even if that turns out not to be true down the line, the markets will still react as if it is. The only thing that’s certain now is that this will play out in the courts, potentially for years. And I don’t believe it will be worth riding the inevitable ups and downs. Sadly, it’s time to let this go. If you followed along on this trade, the prudent thing to do now is to leave and retrieve your remaining capital. The risk is just too high now, and this latest news suggests that SUNE’s management has no clear way out of this. As much as I would like to see the potential of this company bear fruit, with this morning’s news, there’s just no sound case for hanging on. When there is this much speculation and rumors surrounding a company and its management, the full damage is difficult to measure. That means it could get worse from here. And I don’t say that lightly: this is the most disappointing situation I’ve ever witnessed. I’ll continue to follow SunEdison even though it will no longer be in the Energy Advantage Portfolio, and I promise to let you know of any developments. This is such a shame, given the months of research and resources we’ve devoted to our coverage of SUNE. And – worst of all – the extraordinary trust that shareholders placed with management. There’s more to follow on this story. In the meantime, here’s what we suggest: Action to Take: Sell SunEdison Inc. (SUNE) at market. hkornfield says: Moors first rec. SUNE in his expensive newsletter, about 4 months prior to the November rec. you cite. I was already down ~30% but stayed in when he again recmmended it. I bailed last month. His substitute now has no value, especially with the word-for-word lazy publication. I have concluded that “Dr.” (PhD in Political Science) Moors is not a worthwhile resource for any commodity or financial stock. Or anything else. Best regards, and thank you. HJK Ray says:... Here’s 5-minute check on the recommendations of fundamental analysis that will keep you out of stocks in bear markets that every investor needs to know. All you need is the symbol, for which you need stockgumshoe for the likes of Dr. Moors. Go to stockcharts.com and see the Start to chart box at the upper right. Choose the Type of Chart as P&F Chart and Enter the Symbol. When the chart appears, scroll below the chart to set Chart Scaling Method to Percentage and set the Percent to 10 and press Enter. This works good for JKS, 11% is better for SUNE. This chart will tell you if the stock is in a bull or bear market: A bull market makes only higher lows and a lower low is the sell signal. A bear market makes only lower highs and a higher high is the buy signal. The numbers are the year and month. SUNE has been in a bear market since Aug 2015 and JKS has been in a bear market since Apr 2014. If JKS can rise to 30 before falling under 16.93, that would be a new bull market. If you would like to speculate on SUNE at this extreme, Buy at ,65 (an upturn) and stop at .43 (a lower low.) Travis Johnson, Stock Gumshoe, author of this article, says: April 1, 2016 WSJ now reporting that SUNE has been in negotiations for bankruptcy financing and planning a Chapter 11 filing soon. Should be no surprise with the stock trading at 40 cents, but this will be a confusing workout thanks to the asset drop-downs to their yiedcos (which are now far stronger than the parent, and own much of the assets). Jag2608 says:... Judging by the subscribers’ comments, would it be great to keep subscribing to his newsletters? That way we would get an idea which companies to short. Everytime he recommend to buy a company, just do the opposite. Anyone to volunteer?. Just drop me a message the quarterly result of this new DeKentMoore strategy. LOL Post Comment Private Reply Ignore Thread
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